Commercial Law Revision Notes

Contract = an agreement between two or more persons which will be enforced by a court of law *Action for breach of contract is part of common (judge-made) law *Essence of contract law is to protect the bargain bw 2 parties *Must not engage in conduct that is misleading, unconscionable and unfair.

FORMING A CONTRACT
Offer - an offer must be made
Acceptance - offer must be accepted
Intention - the parties must intend to contract
Consideration - must be provided.

REMEDIES
termination of a contract - available for serious breachesdamages - innocent party gets monetary compensation for the loss of contractual benefits specific performance - party required to honour contractual obligations injunction - order by court requiring a person to stop doing something recovery of contract price -

agreed damages clauses - contract itself makes provision for damages to be paid in the case of breach.

OFFER (p164)
An offer exists where a reasonable person would conclude from the facts that the person was willing for their promise to be binding in law. it is a question of intention.
Offerror - makes offer to the - offeree.

RULES OF OFFERS
Must be:
intention or willingness to be bound
a firm promise
communication of the offer - writing, oral, by conduct

- Only the offeree may accept
- Acceptance must be final and unqualified
Masters v Cameron [1954]
court concluded that arrangement made 'subject to contract' was not binding - no acceptance - Problem of the battle of the forms (182)
two parties fire documents at each other containing different terms Butler machine tool co ltd v ex-cell-o corp (england) ltd [1979] - Acceptance must be communicated to the offeror
Felthouse v Bindley [1862]
Contract not made until acceptance has been communicated to the offeror Tallerman & Co Pty Ltd v Nathans Merchandise [1957]

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...﻿CommercialLaw Questions
1 What is meant by the terms "void" and "Voidable"- give examples quoting relevant case law.
Void = is where there is no contract and never did exist in the first place, and a third party has no rights at all under a void contract.
Case law: J Loudon & Co v Elder’s Curator Bonis.
Voidable = is where a contract is valid until the court sets it aside, and a third party has good title if contracted before the contract being set aside or reduced by the courts. (The timing has to be right)
2 What is meant by the term "the postal rule"? look up the following cases and give a brief outline of how" the postal rule" applied in each case:-
(a) Dunlop -v-Higgins 1848 1HLR381
(b) Jacobson Sons & Co -v-Underwood & Sons Limited 1894 2R654
The postal rule is where an acceptance is to be sent by post then the contract is binding from the moment of posting the letter.
In the case of Dunlop v Higgins where the acceptance was sent by Higgins on 30 January but was delayed in the post and never reached Dunlop until 1 February it was held that even though the reply was delayed it was still a binding contract as it was not the acceptors fault there was a delay in the post.
In the case Jacobson Sons & Co v Underwood & Sons the offer remained open until 6 March and as Jacobson wrote and posted a reply accepting the offer on that date it was held as a binding contract as it was posted on the actual date even...

... |
Termination of Offer (Pg 75) (5 ways)
|Withdrawal |Law: Offer can be withdrawn or revoked by the offeror at any time before it is accepted. (When an offer is withdrawn, the offer is said |
| |to be revoked). – Overseas Union Insurance Ltd v Turegum Insurance Co (2001) |
| |Law: Withdrawal must be communicated to offeree (Revocation is only effective when the offeree receives notice of the revocation) Byrne |
| |v Van Tienhoven (1880) – It was held that the revocation was not effective until it was received by the plaintiff. Since the offer was |
| |accepted prior to the revocation, there was a valid contract. |
| |Law: Revocation of offer can be communicated by a third party (as long as offeree obtains knowledge of the revocation) (must be a |
| |reliable and trustworthy source) Dickinson v Dodds (1876) Law: Fresh Offer (Revocation can also occer if the offer is replaced by a |
| |fresh offer) Ban Paribas v Citibank NA (1989) |
| |Law: Offer is opened for a fixed period...

...* IPAAC
* Issues e.g. whether there was a breach of duty
* Principles e.g. Breach if burden of harm was not great
* Authorities e.g. Woods v Multi sport holdings ltd
* Applications e.g. The burden of using helmets was significant
* Conclusion e.g. there is no breach
Law of Contract
Terms of the contract
* Express terms
* Terms stated and agreed to by parties
* In simple cases, terms stated in offer
* Eg, $ reward for cat
* Major commercial contracts require signs from both parties.
* Contract contains most terms
* But, only needs to be written when statute requires
* Not necessarily written in 1 document.
* Pre-contractual statements
* If statement made during contractual negotiation is incorrect:
* Breach of contract only if statement is term of contract.
* 3 classifications
i. Puffery (not K)
a. Terms not taken seriously
ii. Representations (not K)
b. Statements which induce to contract, but not guaranteed.
iii. Terms (K)
c. Statements designed to be binding, guarantee of truth.
* If terms breached, remedied for breach of contract.
* However will depend on Intention
* Oscar Chess v Williams [1957]
* Intent to guarantee truth of statement? Term/representation
* Defendant had no intent to promise truth...

...COMMERICAL LAW EXAM
Agency Definition
Agency may be defined as a relationship between the principal (P) and the agent (A) whereby A has the authority to create a legal relationship between P and the third party (T). The purpose of agency is that two people can enter a valid contract with one another without having to deal with each other personally. Instead, the contract or other transaction is brought about through A who when dealing with T acts or purports to act, on behalf of P.
Authority
The concept of authority of A to act for P is central to the decision as to whether agency exists but authority does not mean that P must expressely consent to A acting on P’s behalf. The concept of authority also encompasses circustances where an agency relationship is created without the express consent of P.
Scope of agency
Distinguishing agency from other relationships is important because the term ‘agent’ may be used in commerce to describe a party who is in fact not an agent at law. In International Harvester Company of Australia Pty Ltd v Carrigans Hazeldene Pastoral Company (1958) 100 CLR 644 the High Court held that to determine whether a legal agency exists it is necessary to look at the substance of the arrangement between P and A, not just the form of the relationship such as the use of the term agent. The following are some examples only of relationship that may create a legal agency:
o Employee
o Broker
o Powers of attorneys
An...

...ORIGINAL OFFER – BANQUE DE PRIBAS... THE ORIGINAL OFFER NO LONGER EXIST... Kim replied by letter accepting the original offer SHE CANNOT DO SO... IT DOES NOT EXIST and insisted on getting the oven at $500 as she was within the 7 day period. Siti ignored Kim's reply and sold the oven to Magoo. THERE IS THUS NO CONTRACT BETWEEN SITI AND KIM
Meanwhile Dim and Siti made a verbal agreement A VERBAL AGREEMENT CAN STILL BE A CONTRACT IF THE INGREDIENTS ARE PRESENT... that Dim would buy the other oven for $490 would take delivery 7 days later. HERE THERE IS AN OFFER AND ACCEPTANCE... AGREEMENT IS PRESENT... IS THERE CONSIDERATION? YES, EXECUTORY. THERE IS AN EXCHANGE OF PROMISES... A BENEFIT FOR BOTH PARTIES – THERE IS ALSO INTENTION AS IT IS A COMMERCIAL AGREEMENT – EDWARTD V SKYWAYS - When Dim came to pay and collect the oven 7 days later, Siti refused to hand over the oven telling hthat the price was now $550. Dim called Siti a cheat and wants to sue her. SITI IS IN BREACH OF CONTRACT
Advise whether Siti is legally liable to either Kim or Dim for breach of contract.
Siti V Kim...

...to terminate, and on 4 June 2009 the P completes a sale of the BNE property, but on the 5 June 2009 the SYD V wants to terminate the SYD sale due to the BNE property not being sold by 1 June?
YES, V can still terminate on 5 June 2009. Common law dictates, V can terminate for failure of fulfilling the contingent condition.
Suttor v Gundowla Pty Ltd (1950) 81 CLR 418 – MF Treasurer (condition precedent) had to give consent before P could complete by 20 Dec and V wanted to terminate by 15 Jan/ didn’t exercise his right to terminate until then cos consent hadn’t been given.
Time can be an essential part of the condition. If a condition isn’t fulfilled, the obligation dependent upon the fulfilment doesn’t arise (ie SYD sale), esp if there’s a time expressed in a condition precedent.
Late occurrence is not fulfilment of the contingent condition. Mere delay (of 4 days) is not, by itself, an election to abandon the right to terminate. It might attract the right to estoppel.
Tanwar v Cauchi [2003] – all HC JJ say they don’t want to restrict V termination for sale and no relief against forfeiture was given (for breach from not paying money by a specific date/ contingent condition). Equity will only stop that common law right in the most exceptional circumstances, i.e. only where V’s conduct contributed to P’s breach OR breach by P came about in circumstances which were totally unforeseeable. Here, probably not. Attitude...

...﻿
Case Notes
Question 1
Taylor v Provan (1864) 2 M 1226
Provan went to Taylor’s farm and offered to buy 31 cattle at £14 per head, but Taylor refused to accept less than £15. After trying unsuccessfully to purchase cattle elsewhere, Provan returned to Taylor’s farm the worse for drink and offered £15 per head, which was accepted by Taylor. Taylor later brought an action against Provan for the price of the cattle, and Provan claimed that he had been incapable, through intoxication, of entering into the contract. Held: There was no evidence to suggest that Provan was totally incapacitated through drink, to the extent that he was unable to understand what he was doing. The contract was valid.
J Loudon & Co v Elder’s Curator Bonis 1923 SLT 226 (OH)
Elder, a Dundee merchant, ordered goods from Loudon on March 23 and 28. On March 31, before any of the goods were delivered, Elder was certified insane and on April 1 Loudon were informed that the contracts were cancelled. The company sued Elder’s curator bonis for damages for breach of contract. Elder was proved to have been insane at the time the orders were given. Held: There was no liability for breach of contract as the orders were null and void.
Muirhead & Turnbull v Dickson (1905) 13 SLT 151
Muirhead & Turnbull supplied a piano to Dickson at a price of £26 to be paid at 15s per month. Dickson fell behind with the payments and the pursuers wished to take back the piano.They did so on the basis...

...ground that the shipment was not made in good condition. The sellers rejected the claim.
By an order made by the Rotterdam county court on the ex parte application of the lighter owners the whole cargo of pellets from both holds was sold for £30,000 net on June 2 to an importer of such pellets who on the same day resold the whole cargo to the buyers for the same sum of £30,000. The buyers then used "the entire cargo to manufacture cattle food... by using smaller percentages in their compound feeds than would be normal with sound goods."
*45
In arbitration proceedings in London the board of appeal of the trade association held that not all the goods in no. 1 hold were shipped in good condition, that though they were "merchantable" in a commercial sense on arrival in Rotterdam they were not of "merchantable quality" within the meaning of the Sale of Goods Act 1893 and that the buyers were entitled to reject the whole cargo. Mocatta J. on a case stated upheld the board's award in the buyers' favour holding that the term for "shipment to be made in good condition" was a condition of the contract breach of which justified rejection and that the sellers were also in breach of the implied condition of "merchantable quality" in section 14 (2) of the Sale of Goods Act 1893 .
On appeal by the sellers: -
Held, allowing the appeal,
(1) that the term "shipment to be made in good condition" was not a "condition" any breach of which entitled the buyers to reject...